Congress Hears Earful from Technology Companies Concerned Over Outdated Laws on Video

Can current U.S. communication laws meet the needs of new video technology and the market conditions they generate?

A chorus of industry representatives told a Congressional hearing on Wednesday current regulations are outdated and were enacted when cable TV companies largely controlled the pay-TV distribution market. In fact, cable operators had 98 percent of the pay-TV distribution market when Congress passed the 1992 Cable Act. Some 53 percent of national program networks were partially or completely owned by a cable operator back then.

In 2006, the cable market share fell to 68 percent and some 15 percent of national networks were vertically integrated with a cable operator, according to a Congressional document.

The Cable Television Consumer Protection and Competition Act, approved in 1992, required cable systems to carry most local broadcast channels and prohibited cable operators from charging local broadcasters to carry their signal, according to a report from TMCnet.

On Wednesday, top technology companies took part in a hearing on the “Future of Video” before the Subcommittee on Communications and Technology. The testimony was placed online by the subcommittee before it was given orally.

See a video of the hearing on CSPAN here.

In his statement, Charlie Ergen, chairman of DISH Network, testified “it is incredible to see how much has changed since 1992.”

“Just as businesses must foster change in a rapidly evolving video marketplace to keep pace with what the consumer wants, government should work to ensure its regulations mirror today’s competitive realities, consumer expectations and advances in technology,” he added.

“Our goal here is to help make a faster and less expensive Internet for all,” added David Hyman, general counsel at Netflix. “To this end, we are connecting to ISPs free of charge and making our hardware design and open source software components publicly available.” 

There has reportedly been some speculation about the future of traditional video distribution platforms and networks. “It is our belief that these platforms and networks will also adapt to today’s shifting video landscape,” said Hyman. “We see the beginnings of this with various authenticated Internet video offerings.  Commonly referred to as ‘TV Everywhere,’ these offerings provide cable subscribers on-demand access to a variety of content through Internet-connected devices like the iPad and Xbox.  In this way, cable subscribers are afforded many of the benefits of Internet video within the bundled offering of their cable service.”

“When you couple limited broadband competition with a strong desire to protect a legacy video distribution business, you have both the means and motivation to engage in anticompetitive behavior,” he warned. "Add to this mix a regulatory and legislative framework largely crafted before the modern Internet era and you have the makings for confusion and gamesmanship.”  

In addition, U.S. Rep Greg Walden (R-Ore.), said in a statement that the FCC (News - Alert) regulates video providers “based on a by-gone era.”

“A lot has changed since 1992…That law was meant to spur competition. It worked,” Walden said. “Nationwide satellite TV providers DISH and DirecTV (News - Alert) now control approximately one-third of the market and are the second and third largest providers. Only 15 percent of national program networks are vertically integrated with a cable operator. Broadcast stations are going mobile and wireless carriers are streaming video. Programmers and pay-TV providers are filling smartphone and tablet screens with their content and services as fast as viewers are clamoring for them.”

In the last ten years, YouTube, iTunes, Netflix, Amazon, Hulu (News - Alert), Roku and Sky Angel began providing video over the Internet. The Communications Act does not apply to these companies, he adds.

He is opposed to expanding video regulation. He points out that video delivered over the Internet specifically to televisions actually doubled in 2011. It will increase six-fold by 2016, he said.

“Regulation is not only unnecessary in such a vibrant environment, it can harm this nascent competition,” he added. “The creative chaos in the marketplace is healthy as parties fight to out-innovate each other and win viewers. A vibrant marketplace benefits consumers and generates new jobs. The last thing we want is to shackle everyone’s entrepreneurial spirit with one-size fits all rules designed for another time.”

He also suggests cable operators, satellite providers and broadcasters be given flexibility to “respond to competition from the Internet players as we would like the Internet players to have to respond to competition from the traditional players. This is how we spur innovation.”

In a related matter, Ryan Radia, associate director of the Center for Technology and Innovation at the Competitive Enterprise Institute, commented in a statement that “volumes of outdated rules remain law, and the FCC wields vast and largely unchecked authority to regulate video providers of all shapes and sizes.”

“It’s high time for Congress to free up America’s video marketplace and unleash the forces of innovation. Internet entrepreneurs should be free to experiment with novel approaches to creating, distributing, and monetizing video content without fear of FCC regulatory intervention. At the same time, established media businesses – including cable operators, satellite providers, telecom companies, broadcast networks and affiliates, and studios – should compete on a level playing field, free from both federal mandates and special regulatory treatment,” he added.

He recommends stopping the “must-carry” rule that requires pay-TV providers to transmit certain broadcast signals without compensation. Put an end to syndication exclusivity, network non-duplication and sports blackout rules.

Repeal programming availability mandates and set-top box regulations, he implored. Eliminate broadcast/cable ownership restrictions and media cross-ownership rules. And no longer let the FCC intervene or make rules on retransmission negotiations.

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